2012 & beyond

1. The personal allowance for those under 65 will increase in 2012/13 by £630 to £8,105
2. The non domicile charge is to increase from £30,000 to £50,000
3. Enterprise investment scheme investment limit increases to £1 million in April 2010

Corporation tax payable

For small and medium sized companies

• Nine months and one day after the end of the accounting period

For large companies

• Instalments
  • The 14th day of the seventh, tenth, 13th and 16th months after the commencement of a 12 month accounting period
• Balance
  • Nine months and one day after the end of the accounting period

2012 and beyond

* see note re changes in 2012

It is possible to transfer unused nil-rate band allowances between spouses or civil partners. A claim may be made to utilise any unused nil rate band from the deceased spouse or civil partner's estate.

The amount of the nil rate-band potentially available for transfer will be based on the proportion of the nil-rate band unused when the first spouse or civil partner died. If on the first death the chargeable estate is £162,500 and the nil-rate band is £325,000, then 50% of the original nil-rate band is unused. If the nil rate band when the surviving spouse dies is £325,000, then that would be increased by 50% to £487,500.

All lifetime transfers not covered by exemptions and made within seven years of death will be added back into the estate for the purpose of calculating the tax payable. This may then be reduced by taper relief.

Main exemptions

1. Most transfers between spouses and civil partners.
2. The first £3,000 of lifetime transfers in any tax year plus any unused balance from previous year.
3. Gifts of up to but not exceeding £250p.a. to any number of persons.
4. Gifts in consideration of marriage or civil partnership: up to £5,000 by a parent, up to £2,500 by a grandparent, or up to £1,000 by any other person.
5. Gifts made out of income that form part of normal expenditure and do not reduce the standard of living.
6. Gifts to charities, whether made during lifetime or on death.
7. Gifts to qualifying political parties

2012 and beyond

From April 2012, a reduced rate of 36% will be introduced where 10 per cent or more of the net estate is left to charity

Notes

1. Transfers between spouses and civil partners living together are exempt.
2. Entrepreneurs' relief is available in respect of gains made on the disposal of all or part of a business, or gains made on disposals of assets following the cessation of a business or gains by certain individuals who were involved in running the business. The first £2 million (rate to 22 June 2010): £5 million (rate from 23 June 2010) of gains that qualify will be charged to CGT at an effective rate of 10%. Gains in excess of the exception will be charged at the normal rate of either 18% or 28%. An individual will be able to make claims for relief on more than one occasion, up to a lifetime total.

Cars and your VAT return

VAT scale figures for private use are now based on carbon emissions. Please refer here for the scale figures for  one month, three month, and annual VAT returns.

Notes

1. For those earning between £139 per week and £817 per week, employers receive a rebate of 1.4% on contracted out money purchase schemes or 3.7% on contracted out final salary schemes, and employees, a rebate of 1.6% for either scheme.
2. For children under 16, and employees over state pension age there are no national insurance contributions payable, but employers' contributions remain payable.

Notes

1. Letting relief is available on let property which has been occupied as your main home.
2. Annual profits are not subject to national insurance.
3. The rate will be dependent on your taxable income for the year

Assets will be dealt with either in a main rate pool, a special rate pool or a single asset pool.

1. Capital allowances allow the cost of capital assets to be written off against taxable profits. They replace the charge for depreciation in the business accounts, which is not allowable for tax relief.
2. Where a business has a chargeable period of less than a year the maximum allowance is reduced or increased pro-rata.
3. When the value of the main and special pools before writing down allowance is given are less than £1,000 they may be fully written off.
4. A loss attributable to the enhanced capital allowance on ECA's may be surrendered for a cash payment of 19% of the loss surrendered, but limited to the greater of the companies PAYE and NIC liabilities for the period or £250,000
5. The capital allowance treatment of business cars is: Expenditure on cars with CO2 emissions above 160 g/km are included in the special rate pool and attract a 10% writing down allowance (wda) and expenditure on cars with CO2 emissions of 160 g/km or below attract a 20% wda as part of the main pool. Cars purchased before 6 April 2009 will remain within the old rules attracting 20% wda up to a maximum of £3,000 per annum. Cars with private use remain in single asset pools subject to the appropriate rate of wda according to their emissions.
6. The rate of relief for large companies is 130% of qualifying R&D expenditure. In the case of SME R&D tax credit scheme, the rate of relief will increase to 200% for companies claiming enhanced deductions against profits.

There have been many changes announced, please contact us for details that you consider apply in the future.

In order to attract a deduction in computing the profits of a trade or business any expenses must be incurred wholly and exclusively for the purpose of the trade. Capital expenditure is not an allowable expense (capital allowances are claimed on these costs), and certain other expenses are barred by statute. However, there are a number of expenses which while deductible also have other favourable tax treatment.

If you find any of these of interest, please do discuss with us the detail of the arrangements as some are quite restrictive.

Notes

1. An annual Christmas party or similar annual event for staff is an allowable expense, and is not taxable on the staff attending provided the cost per head per year does not exceed £150. If this limit is exceeded, the whole benefit is taxable for the party or event where this limit was exceeded.
2. This exemption does not apply to gifts of money. Subsequent awards must be more than 10 years after the last gift; the award is not taxable on the recipient.
3. Either a payment may relate to the first year net financial benefit, or to ongoing net financial benefit, but not both. Various terms and conditions apply for the recipient to receive the payment tax free.
4. The maximum amount is shared between the number of recipients for the same suggestion.
5. Where employees work form home (including on an occasional basis) payments of up to the exempt amount in respect of additional household expenses are not taxable on them. If the employer chooses to make higher payments, they will be tax free if they do no more than reimburse reasonable additional costs incurred because the employee is working from home.
6. Staff in receipt of tax free relocation packages must meet a number of stringent conditions.
7. In order to be allowable the gift must have a conspicuous advert. The advertisement should be on the gift itself, and not just on the wrapping. The gifts may not be food, drink or tobacco (nor be a voucher to buy food, drink or tobacco), and the limit applies to all gifts to the same recipient in an accounting period. VAT is also recoverable on gifts, subject to this financial limit, but the restriction of food, tobacco and alcohol does not apply.
8. Sports facilities made available to staff are not taxable on them as a benefit in kind provided certain conditions are met. The main condition is that the facilities are not also available to the public, so this prevents payment of sports club membership for staff. The exemption also cannot apply to the provision of cars, boats or aircraft and similar, nor to facilities on domestic premises.
9. The provision of full time care in a work place nursery is tax free on staff provided it is offered to all. Otherwise a contribution to the cost of care paid direct to the childcare provider under a contract with the employer, or through the provision of childcare vouchers is tax free up to the weekly limit. Again, detailed conditions apply to this exemption. This limit is reduced to £28 for new employees who pay 40% tax, and to £22 for new employees paying 50% tax.

Do contact us if you would like further help or advice on this subject.

Notes

1. The fixed penalties for late self assessment returns cannot exceed the tax outstanding on the due date for the return. If all of the tax has been paid the fixed penalty is zero. This does not apply to partnership and trust returns and this 'cap' is due to be withdrawn shortly.
2. VAT default surcharge also applies when the VAT return has been submitted but the VAT remains unpaid. The penalty is calculated at the rate shown applied to the VAT outstanding. Late repayment returns still register as a default, but no penalty is due.
3. Penalties at 2% and 5% are not levied if the amount of the penalty does not exceed £400, but the default still registers and increases the potential penalty for the next default.
4. Taxpayers who file late paper return, but pay all of their tax outstanding before 31 January 2012 will have their penalty "capped" at zero.
   So a late paper return will not, accrue a penalty provided that the tax is paid by the due date. This does not apply to partnership returns.

Late payment penalties

Self Assessment

Penalties of 5% of the tax unpaid are charged one month and six months after the due date for tax payment (31 Jan) on 28 February & 31 July.

VAT

The default surcharge penalty system also applies to late payment of VAT liabilities, even if the return is filed on time.

PAYE, NIC and CIS tax

The penalty regime under which late payment of PAYE, NIC and related liabilities during the tax year will attract a penalty. The first late payment in the tax year is not liable to penalties but subsequent late payments attract a penalty base on the total number of late payments in the tax year.

Notes

1. Trust income within the standard rate band is not taxable at the rate applicable to trusts, but bears the rate of tax appropriate to that type of income - savings income at 20%, dividends at 10%.
2. Trustees are liable at the rate applicable to trusts and the related dividend rate if they have power to accumulate income or have discretion over whether the income is made available to beneficiaries.
3. Income taxed on the settlor of a trust, rather than the trustees is taxed as the settlor's top slice of income. This normally arises when the settlor has retained an interest in the trust, but also applies where the trust is for the benefit of his infant children. Settlors will be required to pay any refund of tax on deemed trust income back to the trustees.
4. Capital invested on behalf of an infant unmarried child is treated as a settlement and the income is taxed on the settlor parent if it exceeds the exempt amount.
5. The annual exempt amount is divided by the number of settlements created after 6 June 1978, subject to the minimum amount. There is no annual exempt amount available when the gains are taxable on the settlor under the settlor interested trust provisions.
6. Where a trust has vulnerable beneficiaries, including a minor child who has lost a parent, the trustees may claim to reduce their tax liability (income and capital gains tax) to that which would be borne by the beneficiary. This gives the trustees the benefit of the beneficiary's personal allowances and basic rate band.
7. Bare trusts established for the settlor's children benefit from CGT annual exemption. Income is subject to the £100 limit then taxed on the parent as their top slice of income.
8. This increase was introduced in the 2010 Emergency Budget

Notes

1. The remittance basis of taxation for non UK income and gains must be claimed by most taxpayers who are UK resident but not domiciled here, or not ordinarily resident. Before that the remittance basis was automatic for non UK income and gains.
2. Those with unremitted foreign income and gains below the limit of £2,000 are automatically entitled to the remittance basis, with no loss of allowances.
3. Where the remittance basis is claimed the taxpayer loses his right to UK income tax personal allowances and capital gains tax annual exemption.
4. For those who have been resident for the year of claim and at least seven of the previous nine tax years the remittance basis is only available on payment of the amount shown, as a tax charge on unremitted income and gains. This payment is in addition to the tax on remitted income and gains. No UK personal allowances or capital gains tax exemption would be available. The charge does not apply to children aged under 18. The change counts as UK tax paid for the purposes of Gift Aid.
5. If funds are remitted to the UK to pay the £30,000 charge, tax will be due on any remitted income in the normal way. However, it is permitted to pay the charge direct from a foreign source and avoid additional UK tax.

Changes from 2012

The 2011 Budget included an announcement that the £30,000 charge will increase to £50,000 in 2012 for non domiciled individuals who have been resident for 12 or more years and who wish to retain access to the remittance basis of taxation. The £30,000 charge will be retained for those who have been resident for at least seven years but less than 12 years.

Note: Increase in 40p mileage allowance to 45p for employees using their own transport.

Fuel-only mileage rates

HM Revenue & Customs advisory mileage rates for employee private mileage reimbursement or employer reimbursement of business mileage are:

HM Revenue & Customs review rates biannually and generally any changes will take effect on 1 January and 1 June or 1 July. This area of our site will be updated around the beginning of June and December about one month before any change takes effect.

For employees using their own transport

The approved maximum tax and national insurance free mileage allowances for employees using their own transport for business are as follows:

Income Tax and NICs may both be due when allowances exceed these rates. Employees can claim tax relief on any shortfall.

Rates of up to 5p per mile, per passenger, are also tax and NIC free when paid for the carriage of fellow employees in a car or van on the same business trip.

Chargeable on employees earning £8,500 or over (including benefits), and directors.

The fuel benefit charge multiplier (FBC) for 2011/12 is £18,800 (2010/11 - £18,000).

Car benefit

The tax you pay on your company car is governed by five factors:

• The list price of the car, on the day before it was first registered, plus certain accessories,
• The rate at which the car emits carbon dioxide (CO2),
• The fuel type (for most types of car, this is all the information you need to work out the taxable benefit)
• Your highest rate of income tax
• Any capital contribution to the cost of the car up to a maximum of £5,000

You can find your taxable percentage using the following table:

How to find out how much CO2 your company car emits – see:

• The car’s V5 registration document
• Your dealer
• The data pages of car magazines (current models)
• The Vehicle Certification Agency – www.vca.gov.uk
• The website of the Society of Motor Manufacturers and Traders - www.smmt.co.uk/co2/co2search.cfm

Reliable emissions data is not widely available for cars registered before 1 January 1998. For them, the following taxable percentages apply, regardless of fuel type:

Car fuel benefits

If the employee pays for the full cost of all fuel for private journeys (usually including home to work) there will be no car fuel benefit. In allother cases the full tax charge will be due.

The taxable car fuel benefit, for 2011/12, is calculated by multiplying £18,000 by the same percentage as applies (or would apply) for the car benefit.

Example: A company car driver has a car which, on the day before it was first registered, had a list price of £18,000. It runs on petrol, and emits 168 g/km of CO2.

If we assume the driver pays tax at 40%, the annual tax bill on the car is: £18,000 x 23% x 40% = £1,656

If the employer provides any fuel used for private journeys and is not re-imbursed for the cost, the 2011/12 tax bill for the fuel is: £18,800 x 23% x 40% = £1,729.60.

Company vans

The taxable benefit for the unrestricted use of company vans is £3,000 (with no reduction for older vans) plus a further £550 (2010/11 - £550) of taxable benefit if fuel is provided by the employer for private travel.

The maximum tax payable on the use of a company van is £1,775 p.a., and the employer's Class1A NIC payable is £489.90 p.a.

The tax payable for a basic rate (20%) payer is £710, a 40% payer is £1,420 and someone paying 50% tax and using a company van would be £1,775!

The company's Class 1A NIC payable is £489.90. 

The above is for cars registered since 1 March 2001

There is no limit on the amount that may be contributed to a registered pension scheme. The maximum amount on which an individual can claim tax relief in any tax year is the greater of the individual's UK relevant earnings or £3,600.

If total pension input exceeds the annual allowance of £50,000 there is a tax charge at 40% on the excess. This limit does not apply in the year that full pension benefits are taken. This is subject to transitional provisions and utilising unused allowances from previous years. Total pension input is the increase in value of the aggregate of all the individual’s pension savings. The pension input period is usually the year to the anniversary date which falls within the relevant tax year.

2012 and beyond

As a consequence of the Government's spending review the annual allowance and lifetime allowances are to be reduced as follows:

Investment maximums for ISAs are as follows:

The ISA limit will be increased annually based on the CPI index rounded to the nearest £120.

Notes.

1. Stakeholder cash and medium term products can be held in your ISA.
2. Investments in ISAs are free of income tax and capital gains.
3. Those aged 16-17 can invest up to £5,340 only.
4. ISAs allow you to take your money out at any time without losing tax relief and furthermore you are not required to declare income and capital gains from ISA savings.
5. The income tax credit is restricted to 20%. Capital gains tax deferral relief is also available.
6. ISA investments can include bonds which are issued by Multilateral Institutions.

An HMRC survey* of 1250 individuals concluded that:

• One third of ISA holders had been encouraged to save by the existence of tax-free ISAs and approximately one quarter cited tax incentives as the principle reason for saving.
• 40% of ISA holders have saved £8,000 or more in their ISA account.
• Mini cash ISAs were the most popular form of ISA
• 53% of ISA holders fund their ISAs from their income, while 28% fund their ISA by a transfer from taxable savings and 16% transferred funds from non-taxable savings.
• 14% reported that inheritances and gifts were the primary source of their ISA investments.
• 60% have never made a withdrawal from their ISA while 10% of ISA holders had made four or more withdrawals

* Individual attitudes to saving: Effect of ISAs on people's saving behaviour

2012 and beyond

The EIS limit will increase to £1 million on 6 April 2012.

The rate of stamp duty / stamp duty reserve tax on the transfer of shares and securities is 0.5 per cent. The liability is subject to rounding up to the nearest £5.

Stamp duty land tax

Transfers of property are subject to stamp duty land tax at the following rates.

*£150,000 for property in disadvantaged areas.

**£250,000 at 0% for first time residential buyers who purchase before 25 March 2012.

Partnerships

Stamp duty applies to transfers of partnership interests, but the amount payable will not exceed the amount that would have been payable on the value of any shares or securities included in the transfer.

Stamp duty land tax (SDLT) applies to the transfer of an interest in land into or out of a partnership or the transfer of an interest in a partnership (where the partnership property includes an interest in land). The charge is based on the reported value of the land and the proportionate interest transferred and it applies only to partnerships whose sole or main activity is investing in or dealing in land. There is no longer an SDLT charge on transfers of partnership interests in other partnerships such as professional partnerships, farming partnerships or partnerships carrying on a trade which is not land-related.

New leases

Duty is charged according to the net present value of all the rental payments over the term of the lease (NPV), with a single rate of 1% on residential NPV's over £125,000 and on non-residential NPV's over £150,000.

VAT is excluded from treatment as consideration provided the landlord has not opted to charge VAT by the time the lease is granted.

Lease premiums

Duty on premiums is the same as for transfers of land (except that the zero rate does not apply where rent of over £600 annually is also payable).

Zero carbon homes

Qualification for this relief will require zero carbon emissions from all energy use in the home over a year. To achieve this, the fabric of the home will be required to reach a very high energy efficient standard and be able to provide onsite renewable heat and power. The relief is available for the five years to 30 September 2012 and applies to new homes which are liable to SDLT on the first sale. SDLT relief will be available where the purchase price is up to £500,000. Where the price exceeds £500,000 the SDLT liability will be reduced by £15,000. In this circumstance the balance of SDLT will remain due.

Please contact us for further information relating to the qualifying criteria, the fabric of the building, heat and power generation and additional power for appliances.

Transfers that attract stamp duty not exceeding £5 (fixed or ad valorem) will be exempt and not have to be presented for stamping. The principal reason for this is to reduce administration for smaller transactions.

Air Passenger Duty is charged based on a band that is determined by the distance of the capital city of the destination country in miles from the UK.

Tax on the disposal of waste on operators of landfill sites calculated according to the weight and to the type of waste deposited.

Gift aid

Gift Aid allows charities to reclaim tax paid by UK individual taxpayers on any donations to UK charities. This is effected through a simple declaration and can increase the value of the donation by 25%. Thus for:

1. Individuals are able to claim higher or additional rate relief on cash gifts and payments to charities under gift aid. Basic rate tax is treated as having been deducted, so you must pay enough tax for the year to cover the tax witheld from your Gift Aid payment.
2. Special tax reliefs apply to gifts to charities of certain types of shares and securities, or land and buildings.
3. Self-assessment now allows individuals to divert some or all of any tax repayment due to them for the year to a charity of their choosing, and to opt for this to be treated as a Gift Aid payment, both via entries on the tax return.
4. Individuals also now have the option to make a claim for a charitable donation made in one tax year to be treated as if it had been made in the previous tax year, so long as the claim is made by inclusion on the Tax Return for the current year. So long as the later year's Return is filed in time, this would mean that a payment could rank for higher rate tax relief for the current year, even if the donor is liable at basic rate, only, in the tax year in which the payment is made.

Donor benefit limits

The maximum benefit a donor may receive in return for a charitable donation is as follows.

Payments made to acquire goods or services are not gifts at all and do not qualify for Gift Aid. Certain charities can however allow members free entry in return for donated membership fees.

Give as you earn

1. Employees may authorise participating employers to deduct donations from their gross salary for forwarding to their nominated charities.
2. Employees receive tax relief in full on their donations.

1) This reduces to 16 hours for those 60 and over.

The information in this tax card is based upon the 2011 Budget and other earlier announcements and may be subject to amendment by the Finance Act.

For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.